We consider two likelihood ratio tests, so-called maximum eigenvalue and trace tests, for the null of no cointegration when fractional cointegration is allowed under the alternative, which is a first step to generalize the so-called Johansen's procedure to the fractional cointegration case. The...

In this paper we consider the Fractional Vector Error Correction model proposed in Avarucci (2007), which is characterized by a richer lag structure than models proposed in Granger (1986) and Johansen (2008, 2009). We discuss the identification issues of the model of Avarucci (2007), following...

In this paper we consider a fractionally cointegrated error correction model and investigate asymptotic properties of the maximum likelihood (ML) estimators of the matrix of the cointegration relations, the degree of fractional cointegration, the matrix of the speed of adjustment to the...

The notion of model-free implied volatility (MFIV), constituting the basis for the highly publicized VIX volatility index, can be hard to measure with accuracy due to the lack of precise prices for options with strikes in the tails of the return distribution. This is reflected in practice as the...

We propose a new test for the parametric form of the volatility function in continuous time diffusion models of the type dXt = a(t,Xt)dt + s(t,Xt)dWt. Our approach involves a range-based estimation of the integrated volatility and the integrated quarticity, which are used to construct the test...

In this paper a two-component volatility model based on the component's first moment is introduced to describe the dynamic of speculative return volatility. The two components capture the volatile and persistent part of volatility respectively. Then the model is applied to 10 Asia-Pacific stock...

In the present paper we suggest to model Realized Volatility, an estimate of daily volatility based on high frequency data, as an Inverse Gaussian distributed variable with time varying mean, and we examine the joint properties of Realized Volatility and asset returns. We derive the appropriate...

Recent work by Engle and Lee (1999) shows that allowing for long-run and short-run components greatly enhances a GARCH model’s ability fit daily equity return dynamics. Using the risk-neutralization in Duan (1995), we assess the option valuation performance of the Engle-Lee model and compare...

In this paper, we propose new tests for long memory in stationary and nonstationary time series possibly perturbed by short-run noise which may be serially correlated. The tests are all based on semiparametric estimators and exploit the self-similarity property of long memory processes. We o¤er...

The Pearson diffusions is a flexible class of diffusions defined by having linear drift and quadratic squared diffusion coefficient. It is demonstrated that for this class explicit statistical inference is feasible. Explicit optimal martingale estimating func- tions are found, and the...